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PA Auditor General sounds alarms over municipal pensions

(Harrisburg) -- The state auditor general is warning that rising pension costs for local government workers could push municipalities into bankruptcy and spur tax increases if changes are not made.

Auditor General Eugene DePasquale has sounded the alarm as he releases a report that said Pennsylvania's approximately 1,200 municipal pension systems are underfunded by billions of dollars.

“This is a Pennsylvania-wide problem, not a Pittsburgh or Philadelphia problem, and it is not going away. We are talking about nearly a $7 billion unfunded liability which impacts small townships, mid-sized boroughs and big cities throughout our state,” DePasquale says.

“Some pension plans are so underfunded that promised retirement commitments are at risk. If they fail, the cost will be passed onto the taxpayers. This liability can truly become every taxpayer’s nightmare,” he adds.

DePasquale says most of the systems were funded at 90 percent or higher, based on three-year-old valuations. But he says systems that are below that were underfunded by $6.7 billion, with three-fourths of that attributable to Pittsburgh and Philadelphia.

He makes a number of recommendations to try to lower pension obligations to future employees and calls for consolidating the plans' administration under one roof.

"No single action or recommendation can solve these monumental problems alone,” DePasquale says. “We need state and local elected officials to work together to come up with solutions that will likely need to include the integration of a number of these recommendations.

“We can no longer afford to do nothing,” he says. “The current system is not sustainable and municipal employees, including police officers and firefighters, deserve to know that the pension they are counting on will be there when they retire.”